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Insuring a business for damage to premises caused by fire or flood, or for the theft of vehicles or stock is probably something you would do without thinking. But have you insured your most valuable asset….the people in your business?

Have you asked yourself what would happen if you, a business partner or a top sales person were to die or become critically ill? The loss of knowledge, experience and perhaps the key contacts you rely on could have a seriously damaging effect on contracts, sales and business loans.

A life assurance or critical illness policy can’t make up for the loss of a colleague, but it could help your company survive through a financially turbulent time.

The three main needs for business protection are:

Key person – covers the company for the loss of an employee whose absence would adversely affect profits.

Who takes out the policy?

Who is the life assured?

Who pays the premiums?

Who receives any pay out?

How long should the cover last?

The company

The employee

The company

The company

Normally a short fixed term such as 5 years.

Business loan – the loss of a key individual in a company could adversely affect profits and therefore the ability to repay a loan. Many lenders therefore insist that directors or key employees have cover in place as a condition of the loan. In addition, directors may act as guarantors of loans from lenders, or even provide a loan themselves and require cover.

Who takes out the policy?

Who is the life assured?

Who pays the premiums?

Who receives any pay out?

How long should the cover last?

The company

The key individual /director

The company

The company

The duration of the loan.

Partnership/shareholder – the death, or illness, of a partner or shareholder could mean their share of the business transfers to their family. However, the family may not be interested in running the business or the other shareholders may not wish a family member, who may not have experience in the business, to take over. A life or critical illness policy can provide funds for the remaining shareholders to buy the deceased, or ill, partner’s share of the business.

Who takes out the policy?

Who is the life assured?

Who pays the premiums?

Who receives any pay out?

How long should the cover last?

The partner/ shareholder

The partner/ shareholder

Normally the partner/shareholder.

The company can pay the premiums but there are tax consequences for the individual as a result.

The policy should be put in trust with the other shareholders as the beneficiaries.

These individuals tend to stay with the company longer, so the cover normally lasts longer than key person cover.

It could be taken out for a fixed amount of time or on a renewable, or even whole life basis to give greater flexibility.

Protect offers life and critical illness cover that can last from a short, fixed period through to whole of life. It has built-in flexibility that allows it to change as your needs change over time such as the option to increase the cover each year to keep pace with inflation, or if the value of your business or loan increases.

They are many other aspects to consider with business protection, such as:

calculating how much cover is required

determining whether trust documents or legal agreements are required

looking at taxation, for companies and individuals.

With so many decisions to make, it’s essential that you speak to your financial adviser in order to get advice on the best solution for you and your business.